Hallow MiFID’s Eve: Trick or Treat?

‘Twas
the nightmare before Christmas and Halloween Jack realised that MiFID
was upon us and he had not budgeted nearly enough to make it happen.
So he stole $35 million and plugged the regulatory hole through one
massive computer upgrade that made all of the consultants and computer
suppliers happy Christmas bunnies. 

That's the story we seem to
be hearing anyway.  According to Accenture, the average large firm
spent $35 million on MiFID.   That's about a third more than my
original estimate of $22 million, but less that the $100 million I
heard from one major market-maker.

Equally, it only seems to be
here in London that they're forking out this moolah as most other
countries have been confused about MiFID's implementation, as mentioned
yesterday.  Many believe the transposition and implementation by Czech
Republic, Estonia, Finland, Hungary and the Netherlands all in a
whirlwind flash for November is baloney.  Meanwhile, Spain's Finance
Ministry is saying they'll get it pushed through in December whilst
Poland is being honest and stating that it is "impossible to estimate"
when MiFID will be transposed. 

Maybe this is why 93% of UK companies believe that MiFID will not be "consistently implemented", according to a study by EA Consulting Group released last week.

The survey covered 85 of the UK’s largest investment and financial services providers, and other key results included:

• When
  asked "What is the biggest threat that MiFID poses for your business?",
  40% answered a lack of certainty, 29% a distraction from ‘business as
  usual’ activities, and 6% the cost of implementation;
• When
  asked "What is the biggest headache that MiFID causes your business?",
  29% said the costs of converting legacy systems, 25% the lack of
  awareness among management, and 6% the costs (seems like the same 6% as last time to me!);
• 65% see MiFID as an opportunity and 18% as a threat (former must be banks and latter Exchanges);
• 44% say management’s awareness is good whilst 8% think it's "very poor" (bet the latter's not an Exchange!);
• 34% think compliance will be the biggest cost (really!), 28% IT & systems, and 13% data capture and retention;
• 33% think investment banks will benefit most whilst 11% believe technology providers will (latter must be Accenture, SunGard ...);
• 25%
  reckon that a level playing field will be MiFID's biggest benefit, 20%
  think that it is passporting across borders, and 11% that Europe will
  be a more attractive marketplace for investing.

There's
no real surprises here for me, as it's just another way of finding out
whose cup is half-full and whose is half-empty.  To be honest, most
will find their cup half-full if they really understood MiFID well
early on and planned appropriately by either reducing tariffs and fees
if they are an Exchange or deploying and delivering enhanced services
to investors if they are a Broker.  The half-empty brigade are the
Spanish and Polish who still don't seem to have much of a clue how
MiFID will impact their businesses because their regulators have taken
so long to transpose.

Meanwhile, there are those who thought
their glasses would be brimming over but are yet to find a few drops of
refreshment.  These are the multiplicity of vultures and hyenas who
have been beating the MiFID drum loudly for a couple of years riding on
the Fear, Uncertainty and Doubt (FUD) it was meant to create.  These
FUD-feeders hoped that they would just get consulting, software and
integration work through the very mention of MiFID. 

Oh, the
day of the MiFID’s.  It’s going to cost you.  You should be worried.
And guess what, we have a solution!  Come and get it.  Roll up, roll up.

Now
some of them have earned their crust by being sober, rational and
strategic.  Yes, you guessed it: the lawyers.  With all these new
contracts for retail and professional investing clients, they’ve had a
bonanza.  For the IT guys, there’s been some success too.  For example,
I was reading with interest that a small wee firm from New Zealand – New Zealand? – has been making a mint.

The firm in question is Endace
and they provide tech that measures the performance and security of
telecom networks.  According to their latest half-year figures, profits
and revenues surged as banks prepared for MiFID by investing in their
new NinjaProbe
product.  This box analyses network traffic at 10Gbps and generated
over 20% of the firm’s revenues for the period, $1.7 million, which is
pretty impressive for a product only launched in March.

Ah well, I could go on and on with the nuances of MiFID this week but back to the real world and again, feel free to read earlier MiFID blogs or the Book if you haven’t got to grips with it yet.

Meanwhile,
‘twas the nightmare before Christmas and Halloween Jack went trick or
treating.  He treated those that had been planning for All Hallows Eve
for over a year with the riches of Europe’s new pan-European investment
markets riches ... but for those who only just woke up to his deadline,
he tricked them of all their profits and gave them a darn good
spanking.  And no, they did not enjoy it!